IEA in Paris announced yesterday a release of 60 million barrels from OECD inventories. The implications of this extraordinary action are not positive. Letâ€™s first take a look at the most recent global production data, which shows the large downward move of supply coming into March 2011, from the loss of Libyan oil. IEA is pointing to this loss of supply as the prima causa for its decision.
While some asset markets, perhaps global stock markets, may take comfort from the lower price of oil over the next 90 days, the intermediate term realities, implied by this action, are rather worrisome. I will list a few here: